You've probably heard about Short Sales in the USA. There are a few of them in Vancouver too. I just came across one and thought I'd share some info with you.
A property can be in the early stages of foreclosure which means that the lender has not yet reached a point that it is in control of the process. The owner can still sell the property and then pay out the lender out of the sale proceeds. However if you are acting for the seller make sure to find out how much the seller owes the bank. You want to know for sure that the net proceeds from the sale will be enough to pay out the lender. If they are not, the bank might accept less but the time to negotiate that is before the deal is signed not later.
The deal may collapse at closing because there was not enough money after payment of commissions and closing costs to pay off the lender. The seller then becomes liable to the buyer for his damages.
Make sure to find out if the Seller owes anyone else money. If that creditor subsequently registers a judgment on title after the purchase agreement has been signed then the seller will have to find a way to clear that judgment. If he is already in foreclosure with the secured lender, how likely is it he will come up with money to pay another creditor?
Don’t take the seller’s word that he will “deal with” the new creditor and get it resolved. The secured lender is not going to be co-operative and take less money if a subsequent judgment creditor will also get some money to clear its judgment.
The secured creditor just needs to proceed with the foreclosure and cut out the judgment creditor completely. After the deal was signed another bank registered a judgment, the existing secured lender then wouldn’t co-operate, the deal died and the Realtorreceived no commission
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